College Fundamentals: Financial Aid 101

This article was written by BE Smart Contributor Chelsea L. Dixon, M.S., M.A.T.

What Is Financial Aid?Financial aid is monetary assistance that helps students and their families pay for college expenses. It is distributed based on a family’s financial need and is calculated based on the difference between the cost of attendance and what the family is expected to pay (also referred to as the Expected Family Contribution, or EFC). Students and their families are responsible for the student’s education; financial aid is intended to supplement what students and their families pay and the total cost of attendance (COA), which includes tuition and fees, room and board, books, and other expenses, and refers to the total yearly cost of going to college.

Expected Family ContributionShortly after you apply for financial aid, your EFC is determined. If a school’s cost of attendance exceeds the EFC, the student will qualify for need-based aid and receive an aid package. Be aware, however, that the vast majority of colleges include loans–which must be paid back–in their aid packages. About 50 U.S. colleges have committed to meet their students’ full financial need and have omitted loans from their award packages.

Need-Based Versus Merit-Based Aid
Need-based aid is awarded based on a student’s demonstrated financial need; merit-based aid is awarded based on skill, ability, or exceptional grades. Financial aid is need-based; academic scholarships are merit-based, though some merit scholarships are awarded based on athletic achievement.

FAFSATo apply for federal and state aid and some institutional aid, you must complete and submit the Free Application for Federal Student Aid (FAFSA) online or on paper. Completing the form online will get your application processed faster. Note that new FAFSA rules will go into effect for the 2017—2018Â school year.

The FAFSA requires you to provide demographic (name, address, date of birth, Social Security number, etc.), financial, and other personal information, as well as documentation. It should be completed and submitted the same year you want to receive a financial aid award and as soon after Jan. 1 as possible, since some aid is allocated on a first-come, first-served basis.

After submitting your FAFSA, you will receive a Student Aid Report (SAR), which is a summary of the information you put on the FAFSA. It will not contain information on the amount of financial aid you may be eligible to receive. However, you will be able to review the information you submitted and correct any mistakes. If you provided an e-mail address on your FAFSA you will receive instructions for accessing your SAR online.

CSS Financial Aid ProfileA number of private colleges and universities require the College Scholarship Service Financial Aid Profile, or CSS Profile, by which eligible students can apply for non-federal, institutional aid. Completing the FAFSA is free, but to complete and submit the CSS Profile, which can be submitted as early as Oct. 1, you will be charged a fee of $25 for the first school and $16 for each school after that. However, fee waivers can be granted to first-time college applicants from low-income families.